Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the f Machine A Machine B $12,000 $28,000 $2,200 $4,800 $4,300 $800 $2,400 $7,500 He is told to assume that: Original Cost Labor per year Maintenance per year Salvage value 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 14% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine A = $ The NPV for Machine B = $ Using the net present value as the basis of comparing the machines, Tim should recommend (round your response to the nearest whole number and include a minus sign if necessary). (round your response to the nearest whole number and include a minus sign if necessary).
Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the f Machine A Machine B $12,000 $28,000 $2,200 $4,800 $4,300 $800 $2,400 $7,500 He is told to assume that: Original Cost Labor per year Maintenance per year Salvage value 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 14% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine A = $ The NPV for Machine B = $ Using the net present value as the basis of comparing the machines, Tim should recommend (round your response to the nearest whole number and include a minus sign if necessary). (round your response to the nearest whole number and include a minus sign if necessary).
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table:
Machine A
Machine B
$12,000
$28,000
$2,200
$4,800
$4,300
$800
$2,400
$7,500
He is told to assume that:
Original Cost
Labor per year
Maintenance per year
Salvage value
1. The life of each machine is 3 years.
2. The company thinks it knows how to make 14% on investments no more risky than this one.
3. Labor and maintenance are paid at the end of the year.
The NPV for Machine A = $
The NPV for Machine B = $
Using the net present value as the basis of comparing the machines, Tim should recommend
(round your response to the nearest whole number and include a minus sign if necessary).
(round your response to the nearest whole number and include a minus sign if necessary).
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